PPSR Case Study:

Note:This case example is based on a true story however the identity of the parties involved has been changed to protect their privacy:

XYZ Limited supplies security equipment to the home, commercial and retail markets. XYZ Limited delivered and installed security equipment to the value of NZ$50,000 in a retail store in Auckland. The equipment was supplied under XYZ Limited's standard terms of trade. Such arrangements are also known as Romalpa or Retention of Title clauses.

Two days after the equipment was installed, the retail store company was placed into liquidation. Upon learning this information, XYZ Limited sought legal advice in an attempt to recover the goods.

As XYZ had not registered a financing statement on the Personal Property Securities Register (PPSR) in respect of their security interest, they became a unsecured creditor. Secured creditors (that is, those that had registered their security interests on the PPSR) were given a higher priority over unsecured creditors in the liquidation.

Had XYZ Limited registered its security interest on the PPSR, they may have been able to recover the goods or money owed in the liquidation.

As a result of XYZ Limited's experience, it will now make sure that all sales over a certain dollar value will require a signed credit application form agreeing to terms of trade being registered as a financing statement on the PPSR before the goods are handed over.